Most business owners have no idea that the ERC refundable payroll tax program launched in 2020 was greatly expanded in 2021. So what does this mean for business owners? Stick around and find out precisely what this means to you, your business, and your pocketbook.
Hi, I'm Bill Elkins with Baron Payroll. Most businesses received stimulus money from the federal government due to the pandemic. Many received PPP loans which were eventually forgiven and never needed to be repaid. Additionally, many companies received extra stimulus money in refundable payroll tax credits called ERCs.
In 2021 the federal government decided to expand the ERC program in three main ways.
The first way was they significantly increased the amount of stimulus money employers could receive. In 2020, employers received up to $5000 per employee. In 2021, businesses can earn up to $21,000 per employee - or more than four times the amount offered in 2020.
The second way this program was expanded was the eligibility threshold for a reduction in gross receipts was significantly reduced. For example, in 2020, businesses needed a 50% or more decline in gross receipts, whereas, in 2021, companies can qualify with only a 20% reduction. Again, keep in mind the decline in gross receipts we're talking about is 2021 vs. 2019, before the pandemic.
Lastly, the third way is larger companies with over 100 employees can qualify now. For example, in 2020, only companies with 100 or fewer employees could qualify. In 2021, companies with up to 500 employees can qualify for the ERC program.
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